Considering the prominence of climate change in today’s global narrative, it is no surprise that renewable energy is at the forefront. While this is fairly new in the African context, renewable energy promises to be the future of our energy needs – providing clean and reliable energy. Indeed, renewable energy is crucial to the success of Kenya’s Vision 2030 energy goals, noting that renewable, sustainable, competitively priced and affordable energy is one of the main catalysts of industrial growth and job creation.
Given the promise of renewable energy, it may then come as surprise, to some, that, according to media reports, Kenya opted not to proceed with a proposed renewable energy investment opportunity. VR Holding AB, a Swedish energy company planned to develop a 600MW power plant in Kenya’s Malindi region, at the cost of USD 2.45B, approximately Ksh 253 billion. Looking at the investment sum alone, this, on face value, seems to be an investment opportunity that Kenya cannot afford to lose out on. After all, such a large-scale development would potentially put Kenya at the forefront of renewable energy prominence in the African context.
However, there is more than meets the eye. In considering the viability of this project, the Ministry of Energy is required to look at the bigger picture. This involves looking at the project from an objective lens, and determining not only the potential benefits of the project, but also how the project fits into Kenya’s energy plan. For instance, due to traditionally considered electricity constraints, supply and demand have to be effectively balanced. In this case, the Ministry of Energy argued, and rightly so, that should the project be given the green-light, the resulting electricity supply, would far outweigh the country’s projected demand. This will result in electricity consumers paying for unused electricity, considering that such projects are normally pegged on an advance purchase contract.
Further, it can also be argued that Kenya’s transmission and distribution systems may not be ready for such an increase in capacity. Currently, Kenya’s transmission and distribution systems handle approximately 2000MW, and an upgrade to allow the additional 600MW comes with a significant budgetary provision that may not be currently in the short-to-medium term plan.
As may have been considered by the ministry, blindly increasing the country’s generation capacity is not the answer to our energy problems. Rather, a concerted effort is required in the entire electricity value-chain. Placing the focus only on generation capacity, without considering transmission, distribution and consumption would result in a less than optimal investment. Already, the 310MW Lake Turkana Wind Power project in northern Kenya is nearing completion. This is easily the largest wind farm in Africa, and work is ongoing for transmission lines that are necessary to connect the plant to the national grid.